US non-farm payrolls fell by a much smaller-than-expected 20,000 last month - raising hopes yesterday that the world's largest economy may not be plunging into recession after all.

Stockmarkets around the world bounced higher on the news, while bond prices weakened as markets reckoned that the figures released yesterday reduced the possibility of further interest rate cuts from the Federal Reserve. The US labor department said that although employers outside the agricultural sector shed jobs for the fourth month running, the 20,000 cuts were a long way down from March's 81,000 figure.

"That's a sign that this economy is not as robust as any of us would like it," President George Bush said in a speech on the economy in St Louis.

But he added that a rescue package for the country, which has been hit hard by the sub-prime mortgage crisis, had yet to kick in. "We're a resilient economy," he said. "We worked well with Congress and ... the effect of a robust attempt to inject life hasn't really kicked in yet."

Financial markets were also cheered after a group of central banks around the world, including the Fed, announced large injections of liquidity into dollar-based money markets in an attempt to encourage commercial banks to start lending to each other again and thereby push down money market interest rates.

The Fed said it would raise the amounts offered in some cash auctions to financial institutions to $150bn (£76bn) from $100bn, while the European Central Bank and the Swiss National Bank said they would boost their auctions of US dollar funds for European banks. The ECB and SNB said they would keep providing extra dollar liquidity as long as it was needed.

Both developments helped the FTSE 100 close up 122 points at 6209 - a three-month high - while the Dow Jones industrial average was also up.

Analysts had been expecting similar US labour figures to those in March. The unemployment rate had been expected to rise to 5.2% from 5.1% but in the event fell to 5% last month. There were 7.6 million people unemployed as of April, up from 6.8 million a year earlier.

The US is struggling with the effects of the credit crunch and tumbling house prices, which have caused large layoffs in the construction sector in particular. In April, building firms slashed 61,000 jobs, manufacturers cut 46,000 and retailers got rid of 27,000. But those losses were eclipsed by job gains in education and healthcare, professional and business services, the government and elsewhere.

But economists warned against reading too much into one month's numbers. Rob Carnell, at ING Financial Markets, said: "Although the make-up of this payrolls report does not strike us as particularly convincing, and we continue to expect a more dramatic weakening in the months ahead, there is no denying that this month the figures have come in on the stronger side of our expectations."

The central bank announcement was the third phase of coordinated liquidity action to be announced since December, when some money market rates were nearing their highest levels in seven years.

The Bank of England was not involved in the action because it had already introduced its special liquidity scheme last week. It also said yesterday it had no need to inject dollar funds in London markets because there was not a shortage of them.

Interbank lending rates for three-month sterling funds, or Libor, fell again yesterday, to 5.815%, suggesting that the Bank of England's scheme may be having some effect. By contrast, Libor euro rates rose for the 12th week in a row.